Wall Street Futures Fall as Middle East Risks, Oil Prices and Canada Tariffs Take Focus: Dow Jones, S&P, Nasdaq

U.S. stock futures moved lower on Tuesday as investors monitored another rise in oil prices and the risk that disruption to the Strait of Hormuz could persist, while fresh U.S. tariffs on Canada and upcoming Home Depot (NYSE:HD) earnings also remained in focus.

Gold slipped back below $4,400 an ounce, while crude prices strengthened following another security incident involving a vessel transiting the Strait of Hormuz.

U.S. Stock Futures Point Lower

Wall Street futures extended the cautious tone seen in Monday’s session, when equities fell amid concerns about rising energy costs and the prospect of a prolonged Middle East conflict.

At 03:05 ET (07:05 GMT), Dow futures were down 49 points, or 0.1%, while S&P 500 futures declined 29 points, or 0.4%. Nasdaq 100 futures dropped 209 points, equivalent to 0.7%.

The major U.S. averages closed lower on Monday, with the S&P 500 suffering its weakest session of August so far.

“The overall equity mood soured,” analysts at Vital Knowledge said.

Losses were partially contained by strength among semiconductor stocks. Chip companies benefited from reports concerning revenue expectations at Claude developer Anthropic (NASDAQ:ANTP) and Nvidia’s (NASDAQ:NVDA) financial commitment to an Ohio data centre, which was smaller than anticipated. Vital Knowledge said both developments helped improve sentiment surrounding the artificial intelligence investment theme.

Deutsche Bank strategists, meanwhile, pointed to growing concerns about the Iran war, which pushed crude prices back above $90 and revived fears that higher energy costs could generate another inflationary shock. U.S. government bond yields rose alongside those concerns.

Brent Crude Returns Above $90 as Hormuz Risks Escalate

Oil prices continued higher on Tuesday, with Brent crude futures gaining 0.3% to $91.10 a barrel. U.S. West Texas Intermediate futures advanced 0.6% to $85.02.

The United Kingdom Maritime Trade Operations agency reported that a vessel travelling outbound through the Strait of Hormuz had been struck by an unidentified projectile. The incident caused damage to the ship’s engine room and resulted in a crew casualty.

The latest disruption comes after U.S. President Donald Trump said Washington would not seek an extension of the framework ceasefire agreement signed with Tehran in June, which expired on Monday.

Trump also suggested that the U.S. had established a back channel with officials from Iran’s Islamic Revolutionary Guard Corps, although Iran rejected that claim.

The U.S. president additionally threatened to bomb Oman, which has been attempting to negotiate its own agreement with Iran aimed at reopening the Strait of Hormuz. Both Iran and Oman have coastlines bordering the strategically important waterway.

Commercial tanker traffic through the strait remains effectively stalled. Before the war began in late February, the route carried roughly one-fifth of global oil flows.

“With both sides still far apart, investors grew pessimistic that the Strait of Hormuz would properly reopen any time soon,” Deutsche Bank analysts said.

Gold Slips Below $4,400 as Treasury Yields Rise

Gold prices moved lower as rising U.S. Treasury yields increased pressure on the non-yielding precious metal, while higher oil prices added another layer of uncertainty around the inflation outlook.

The benchmark 10-year U.S. Treasury yield extended its advance, raising the opportunity cost of holding gold.

Investors are also waiting for minutes from the Federal Reserve’s July meeting for additional signals on the direction of U.S. interest rates.

Expectations of a possible Fed rate increase next month have risen somewhat as Middle East tensions increase the risk of energy-driven inflation. However, compared with a week earlier, markets have substantially reduced the probability of a September increase following unexpected job losses, softer-than-forecast consumer inflation and weaker July retail sales.

Canada Braces for New U.S. Tariffs

Trade tensions are another major focus, with Canada preparing for a new round of U.S. tariffs scheduled to take effect at midnight on Tuesday unless Ottawa and Washington reach a last-minute agreement.

U.S. Trade Representative Jamieson Greer warned that Canadian retaliation would not be “tolerated,” adding that he expects the neighbouring country and longstanding U.S. trading partner to adopt a “more conciliatory approach.”

Canadian Prime Minister Mark Carney is expected to speak with Trump on Tuesday, according to media reports. Carney has also instructed Canadian negotiators to offer some concessions in an attempt to prevent the new duties and secure relief from existing tariffs.

The Trump administration threatened in July to impose tariffs of 50% on a broad selection of Canadian goods, including wine, furniture, fishing rods and hockey sticks, using a Depression-era law intended to address alleged discrimination against U.S. products.

Home Depot Earnings Put U.S. Consumer in Spotlight

Home Depot (NYSE:HD) is scheduled to release its latest quarterly results, beginning an important week for U.S. retail earnings that will also include Walmart and Target.

The home-improvement retailer warned in May that economic uncertainty stemming from the Iran war and continued affordability pressures were discouraging some Americans from undertaking larger renovation projects.

That trend is particularly relevant for Home Depot because its products range in price from around $5 to more than $500, while the average customer basket is approximately $90.

CEO Ted Decker previously said Home Depot customers appeared to be in “reasonably good shape,” although they were showing reluctance to commit to major remodelling projects.

Investors will therefore be watching the latest results for evidence of whether that caution has persisted and for any updated management commentary on consumer spending.

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